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Scientific Games Shares Popped: What You Need to Know

Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Scientific Games(Nasdaq: SGMS) surged almost 11% in early trading after the maker of technology for lotteries and other types of gaming reported better-than-expected fourth-quarter sales.

Now what: Even so, this isn't a growth story. The company's operating loss improved to just $11 million thanks to fewer non-cash charges. Debt is also up over the past year, from $1.37 billion to $1.39 billion.

Scientific Games says it produced $61.9 million in free cash flow during 2010, but that's balanced against more than $100 million in interest payments over the same period. Seeing that, I wonder where the funds for growth will come from and who will end up paying the tab. Keep clear of this stock, Fool.

Author

Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment. Find him online at timbeyers.me or send email to tbeyers@foolcontractors.com. For more insights, follow Tim on Twitter.